Endnotes

(The author is thankful to Professor H G Hanumappa and Dr Bhende, both of ISEC, Bangalore and to Professor Katar Singh and Dr Thomas, both of IRMA, Anand for their useful comments on an earlier draft of the paper. However, the author alone is responsible for any errors. Thanks are also to Mrs.Lissy Varghese for word processing of the paper).

1. Such observation was made by the Narasimham Working Group set up to examine the problems and prospects of creating RRBS. See Reserve Bank of India (1985), p.78.

2. Nearly 150 out of 196 RRBS in the country were running under losses. Many out of them have eroded their capital base. The Khusro Committee which reviewed the agricultural credit system in the country recommended that since the RRBs have become weak and debilitating they should be abolished as separate entities and should be merged with their original sponsoring banks (Reserve Bank of India, 1989). The Narasimham Committee on Financial System recommended that in order to improve the viability of the RRBs they be allowed to do all the banking business besides giving them the option of becoming the subsidiaries of the commercial banks (Narasimham Committee Report, 1992).

3. In a recent policy change the RBI has allowed the RRBs to lend 40 percent of their funds to non-target groups.

4. This is a strategy which the RRB has learnt to adopt over the years to make its unsecured loans secured. To make the indirect security of unsecured loans more effective, the bank was releasing the collateral pledged for a secured loan only when the borrower repaid both the loans.

5. For households receiving capital subsidy under various government programmes, the total borrowings considered is inclusive of such subsidy. This is because in the absence of subsidy they would have received a loan to the full extent of the project cost from the bank.

Y = 1272 + 77.8 X₁ (1)

(13.15)*

n = 131 R² = 0.57

Y = 142 - 0.14 X₁ (2)

(1.06)

n = 66 R² = 0.02

Y = -1144 + 76.9 X₁ + 5335 X₂ (3)

(15.7)* (3.22)*

n = 197 R² = 0.55

* Indicates significance of ‘t’ values at 1% level.

These equations basically explain the influence of value of assets owned (X₁) by the sample households on the amount of loan (Y) obtained from the RRB. While equations (1) and (2) are for households coming under general schemes and poverty alleviation schemes respectively, equation (3) is for all the households taken together. X₂ in equation (3) is a dummy variable considered for capturing the influence of selection of a household under the poverty alleviation scheme, for such households are to get loans irrespective of their asset position.

The value of assets shows a significant influence (at 1% level) on the quantum of loan obtained from the RRB (Equation (1) and (3) except in the case of households coming under poverty alleviation schemes (equation (2)). In other words while for the general scheme households the quantum of loan obtained is determined by their asset ownership, the households under poverty alleviation schemes have received loan from the TGB irrespective of their asset ownership. The significance of dummy variable (X₂) in equation (3) corroborates the latter point.

15. For a study which has dealt with the sustained access or repeat borrowings of IRDP beneficiaries, See Pulley, Robert V (1989).

16. The Grameen Bank of Bangladesh is one of the major oft-quoted success stories in the world. The Grameen Bank by following the policy of group based lending has been able to overcome the main problem of collateral and in the process could reach even the poorest of the poor quite successfully. See Hossain, Mahabub (1988).